In re Northwest Airlines Corp. Antitrust Litigation

Passenger airlines Northwest Airlines, Inc. (Northwest), Delta Air Lines, Inc., and US Airways, Inc. (defendants) each used a hub-and-spoke routing system. Under this system, an airline routed flights from spoke cities through two or three primary, hub cities. The airlines sometimes charged a higher price for a flight from a spoke to the hub than for a flight from a spoke to the hub to a second spoke. For example, Northwest might charge $400 for a ticket from New York to its Detroit hub but only $300 for a ticket from New York to Detroit to Columbus, Ohio. This practice charged passengers a premium to land at an airline’s hub, where the airline had enough market share to force passengers to accept high prices. To save money, passengers sometimes bought what was called a hidden-city ticket. A hidden-city ticket was a spoke-hub-spoke ticket, e.g., a $300 New York-to-Detroit-to-Columbus ticket, purchased for the purpose of going to only the hub city, e.g., Detroit. To protect the hub premiums, the airlines’ ticket contracts prohibited passengers from buying hidden-city tickets. A group of passengers (plaintiffs) sued, alleging that the airlines had collectively violated § 1 of the Sherman Act by conspiring with each other to prohibit hidden-city tickets and protect their hub premiums. In support of this claim, the passengers presented evidence that the airlines had collaborated at industry events about preventing passengers from using hidden-city tickets. The passengers also alleged that each airline had individually violated § 2 of the Sherman Act. In support of this claim, the passengers presented expert testimony that each airline had monopoly power at its hub and used that power to charge premiums. The airlines moved for summary judgment, arguing that (1) the fraud-prevention exception prevented liability under § 1 of the Sherman Act because the joint industry efforts were intended only to prevent passengers from defrauding the airlines by buying hidden-city tickets that did not accurately reflect the passengers’ true destinations and (2) the passengers had not presented sufficient evidence to establish either alleged antitrust violation.